The identification of subtype-specific translocations has revolutionized diagnostics of sarcoma and provided new insight into oncogenesis. We used RNA-Seq to investigate samples diagnosed as small round cell tumors of bone, possibly Ewing sarcoma, but lacking the canonical EWSR1-ETS translocation. A new fusion was observed between the BCL6 co-repressor (BCOR) and the testis specific cyclin B3 (CCNB3) genes on chromosome X. RNA-Seq results were confirmed by RT-PCR and cloning the tumor-specific genomic translocation breakpoints. 24 BCOR-CCNB3-positive tumors were identified among a series of 594 sarcomas. Gene profiling experiments indicate that BCOR-CCNB3-positive cases are biologically distinct from other sarcomas, particularly Ewings sarcoma. Finally, we show that CCNB3 immunohistochemistry is a powerful diagnostic marker for this group of sarcoma and that over-expression of BCOR-CCNB3 or of a truncated CCNB3 activates S-phase in NIH3T3 cells. Thus the intrachromosomal X fusion described here represents a new subtype of bone sarcoma caused by a novel gene fusion mechanism.